Mortgage rates can change daily and even hourly.
President Trump’s tariff proposals have caused a dizzying ride in the mortgage market, with the average rate on a 30-year fixed mortgage slingshotting between 6.5% and 7% in recent weeks.
Housing experts say mortgage rates could maintain that range for a while, but there are too many wildcards to predict their long-term direction.
The economy could be heading toward a recession, or it might just keep chugging along. Inflation could come roaring back, or it might not. Sweeping tariffs could be imposed on a broad range of trading partners or postponed indefinitely.
“The fact that [President Trump] has been very impulsive with his statements and his actions, especially creating this major trade war with China, has made mortgage rates somewhat directionless,” said Melissa Cohn, regional vice president at William Raveis Mortgage. Since tariffs are still being negotiated, there’s no way to know the exact outcome in the financial markets.
The situation creates a dilemma for the Federal Reserve, which has paused interest rate cuts until there are evident signs of an economic slowdown. In recent days, Trump has upped the pressure on Fed chair Jerome Powell to preemptively lower interest rates to help boost the economy. With investors and lenders bracing for more news on Trump’s trade agenda, more panic-based turbulence is likely in the coming months.
“Uncertainty about the tariffs and the volatility in the stock market could lead to a slowing economy, or even a recession, which should help get inflation lower and bring rates down,” said Gregory Heym, chief economist at Brown Harris Stevens. “But then there’s a risk we end up with higher inflation because of the tariffs, which wouldn’t be good for rates.”
Expensive borrowing rates are just one stressor prospective buyers face in a housing market plagued by high home prices and low inventory. Here’s what to expect as the spring homebuying season kicks into gear.
Read more: Spiking Bond Yields May Have Paused the Tariffs, but They Could Cost You in the Long Run
What could cause mortgage rates to rise or fall?
The direction of mortgage rates ultimately depends on the economic impact of policies enacted by the administration and the projected pace of the Fed’s interest rate cuts. Conflicting macroeconomic forces and policies could push mortgage rates up or down.
Market uncertainty over tariffs
The back-and-forth on tariffs has caused disarray in the bond market. Mortgage rates are linked to 10-year Treasury yields, which have made dramatic swings daily in response to news headlines, economic data and even the president’s social media posts.
For bond yields (and mortgage rates) to fall, or at least stabilize, there needs to be greater clarity on geopolitical relations, the global supply chain and government debt. Trump’s tendency to flip-flop on trade policies means there could be uncertainty for a while.
“Big tariffs right now wouldn’t just make inflation worse. They could set off a chain reaction of economic trouble that central banks and governments aren’t ready to handle,” said Greg Sher, managing director at NFM Lending.
Fed rate cuts (or lack thereof)
After inflation showed signs of slowing in late 2024, the Fed reduced interest rates three times but has postponed rate cuts so far this year. The central bank is expected to keep borrowing rates the same at its Federal Open Market Committee meeting on May 7.
Increased unemployment and slowing economic growth could force the Fed to lower interest rates in late spring or early summer. However, if inflation increases due to Trump’s sweeping tariffs, the Fed may have to delay rate cuts.
While the central bank doesn’t set mortgage rates directly, its policy moves indirectly influence consumer borrowing rates, like mortgages, over the long term. Mortgage rates are highly sensitive to fiscal policy and economic growth.
Recession risks
If the economy slips into a recession, as many experts now foresee, mortgage rates could drop. Even the fear of a downturn can push mortgage rates lower, as investors tend to buy safer investments like US Treasury bonds, which drives long-term yields down.
But declining investor confidence in the US economy could be disrupting that pattern. “People are starting to question how safe even US Treasuries are (and those are the gold standard for safety),” said Heym.
A major concern is that foreign trading partners that hold massive amounts of US Treasury debt will sell that debt, causing yields to skyrocket. In that case, Cohn said, not even rate cuts by the central bank would be able to bring yields or mortgage rates down.
Read more: Think a Recession Will Make Homebuying and Mortgages Cheaper? Not Quite
